Q. I’m married with two kids and I just can’t swing $600 or $700 a month for health insurance. We never go to the doctor. Should I pass?
A. No! In truth, this wasn’t a question from a reader. But it is pretty much the first thing the host of a morning radio show asked me when I appeared on his show last week.
Now I don’t have inside information on this gentleman’s personal finances, but as I told him, any uninsured person who lets the 2014 open enrollment period come and go without signing up for health coverage is playing with fire. There are three major consequences.
No money to pay big medical bills
It’s great that this broadcaster and his family are healthy, but if someone should experience a serious illness or injury later this year, that $600 a month that they thought was too expensive is suddenly going to look like a bargain they wish they’d taken. If one of them should land in the hospital with appendicitis, they’re going to have to figure out how to pay the $20,000 or $30,000 bill on their own.
No way to get insurance until 2015
Once open enrollment closes on March 31, there’s no way to get private individual insurance coverage again until 2015—either through your state’s Health Insurance Marketplace or directly from an insurance company.
There are exceptions if you experience a so-called “qualifying life event.” In that case, you have a 60-day “special enrollment period” to purchase new coverage at any time of year. Qualifying life events include:
- Loss of job-based health insurance (it doesn’t matter if you quit or were fired).
- Expiration of existing insurance, such as COBRA, a student health plan, or a pre-2014 plan that runs out midyear.
- Marriage, divorce, or the death of a spouse.
- Becoming a parent through birth, adoption, or foster care.
- Moving away from your plan’s geographic service area.
Notice what’s not on the list? Getting sick and incurring lots of health care expenses, that’s what. That is by design. If you allow people to wait until they’re sick to get insured, it runs up the cost of insurance for everyone. And it’s not fair to the 4.24 million people who have already complied with the law and enrolled in coverage through the marketplaces, per the government’s latest enrollment report.
Penalty on your income tax
If you don’t get insured by the end of the month, you face a tax penalty when you file your 2014 tax return. You may have read that it's only $95, but most people will actually pay quite a bit more than that. The real penalty is $95 per adult and $47.50 per child, up to a maximum of $285 per family or 1 percent of income, whichever is greater. And it increases in subsequent years.
The Tax Policy Center, a nonpartisan Washington group, has created a penalty calculator that does the math for you. Thinking about the radio host, I looked up what the penalty would be for a family of four with an income of $80,000 a year (which entitles them to a subsidy to lower the cost of insurance to, yes, about $600 or $700 a month). The penalty will be $597 for the 2014 tax year, $1,188 in 2015, and $1,473 in 2016. And the family still won’t have health insurance.
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